We created a guide on crypto scalping in which we’ll explain to you what scalp trading is and how it works. It’s intended for experienced crypto investors as it requires a large number of trades to be made within one day. Nevertheless, this technique is trendy among traders because it brings quick profits.
We’ll also discuss its main benefits and risks and we’ll give you some tips on how to scalp crypto.
Learn in This Article
What Is Crypto Scalping?
Crypto scalping is a trading technique that refers to buying crypto coins at their bid price and selling them at their ask price. This is a short-term investment strategy whose goal is to take advantage of large changes in the prices of crypto assets to make a small profit.
This is why the crypto scalping technique is used for daily trading. This means that investors must react quickly, often within a few minutes. This makes crypto scalping more suitable for experienced traders.
Moreover, a successful crypto scalper will use various scalping strategies and tools to conduct trades. These may include trading bots, crypto charts, and API tools.
How Does Crypto Scalping Work?
As mentioned above, scalpers will buy a certain crypto coin at its bid price and sell it at its ask price. Scalp trades usually last between 5 and 30 minutes, which means that scalpers can make multiple trades within one day.
The main characteristics of scalping include high trading volume, short holding times, technical analysis, risk management, and small margins.
That said, scalping can be done in the following way:
Traders will study the charts and prices of cryptocurrencies to find out when is the best time to buy and sell. They will often focus on markets with high liquidity since they have a high trading volume.
If there are indications that the price of a certain coin could go up, the scalper will buy it at a lower price and sell it when its price goes up. Traders can apply the scalping technique several times within a day.
Scalpers also use charting tools and indicators, such as RSI and MACD, to predict price changes. Scalping can be used as both a primary and secondary trading strategy.
The best pairs for crypto scalping include:
- BTC/ETH
- BTC/BNB
- ETH/BNB
- BTC/SOL
- ETH/SOL
How to Scalp Crypto — 5 Strategies
You can use the scalp trading cryptocurrency technique in several ways:
Range Trading
Range trading is the most popular scalping strategy that refers to identifying entry and exit points. This means that traders will buy at the lower end and sell at the upper limit. This strategy is ideal for flat markets since the price fluctuations are more predictable and limited.
To start range trading, traders will need to use 1–5 minute charts. Then, they’ll have to identify the period when prices tend to go up and down (support and resistance). The last step refers to buying at support levels and selling at resistance levels.
Arbitrage
Arbitrage may be the best crypto scalping strategy since it has the potential to bring the most profit. Namely, this strategy refers to capitalizing on small price fluctuations across multiple markets.
For example, investors will purchase an altcoin on one market at a lower price and trade it on another market at a higher price. However, this strategy requires monitoring several markets at the same time as well as using advanced scalping tools.
Bid-Ask Spread
This strategy refers to profiting from differences in bid and ask prices. On that note, scalpers must find a market that offers the highest bid prices and lowest ask prices. To use this strategy, scalpers will have to choose their trading pairs, recognize their spread, and execute the trade.
For example, if the highest bid stands at $200 and the lowest ask price is $205, the bid/ask spread will be $5.
Moving Average Crossover
This crypto scalping strategy compares a short-term moving average and a long-term moving average. Its goal is to identify trends by comparing bullish and bearish markets and determining where they intersect. This strategy usually includes the 50-day and 200-day moving averages.
Price Activity
Price scalping refers to the analysis of price movements. This strategy will help investors find suitable investment opportunities. Price trends can be identified through various indicators, such as SMA and RSI.
Pros and Cons of Crypto Scalping
Crypto scalping comes with the following advantages and disadvantages:
Pros Cons
Types of Scalping Indicators
There are two main types of crypto scalping signals or indicators — systemic and discretionary.
Systemic Scalping
Systematic scalping uses predetermined parameters. I.e., the scalper will use technical analysis to determine when to enter and exit the market. Systematic scalpers will also rely on trading bots.
Discretionary Scalping
Discretionary scalping refers to making decisions according to market conditions. This type of scalping also relies more on improvisation and less on indicators.
Best Indicator for Scalping
The best indicators for scalping include:
- Moving Average Convergence Divergence indicators (MACD)
- Relative Strength Index Indicators (RSI)
- Parabolic Stop and Reverse (SAR)
Top Tips for Scalping Crypto
Here are some scalping cryptocurrency tips you can try:
Opt For Volatile Digital Coins
A good scalping cryptocurrency will be highly volatile, like BTC and ETH. On that note, find coins whose prices fluctuate by at least 3% on a daily basis. This means that stablecoins are not suitable for scalping since their price rarely varies.
Find a Crypto Exchange That Imposes Low Fees
To maximize your profits, create an account on crypto exchanges that impose low trading fees, such as Binance and Kraken.
Learn How to Read Charts
To become a successful scalper, you’ll have to learn how to read crypto charts. These charts will help you identify trends and patterns in price movements.
Place Limit Orders
By placing a limit on your buy and sell orders, you’ll avoid paying taker fees. You should also place orders slightly above or below the main technical levels.
Manage Your Risk
To reduce the risk of loss, use stop-loss orders and avoid overleveraging. In addition to that, avoid investing more than 1% of your capital per trade.
Is Crypto Scalping Profitable?
Yes, crypto scalping can be profitable. However, it will require consistency and knowledge. On that note, if you want to profit, you’ll have to learn how to read charts, be up to date with market trends, and know how to use various trading tools.
Keep in mind that you’ll also have to make quick decisions so that you don’t miss a good investment opportunity. This makes crypto scalping more suitable for professional investors and short-term traders.
Best Crypto to Scalp
The best crypto to scalp will be crypto with a large day-trading volume and high volatility — its price should fluctuate by at least 3% daily.
With that in mind, the best cryptocurrencies to scalp right now are:
- Bitcoin
- Ethereum
- Litecoin
- Binance Coin
- Ripple
Scalping vs Day Trading
The main difference between scalping and day trading can be seen in their duration. Namely, scalping takes place within a few minutes, while day trading can last several hours or days. Moreover, scalping refers to executing multiple trades within one day.
On the other hand, day trading involves lower trading frequency. As such, it can bring higher profits.
Scalping vs Swing Trading
Swing trading refers to buying and selling cryptocurrencies within a few days or weeks. Its goal is to provide higher profits from price fluctuations. Swing traders won’t make multiple transactions within one day.
Instead, they’ll hold their coins for a few days — until the market becomes favorable for trading.
Scalping vs Position Trading
Position trading is a technique based on long-term trends. Unlike scalpers, position traders will not sell their coins immediately, but will hold them for several months or years.
Furthermore, scalpers will use technical analysis, while position traders will combine technical and fundamental tools.
Conclusion
Crypto scalping refers to buying digital assets for a lower price and selling them for a higher price. All trades take place within one day, usually within minutes. The goal of this trading strategy is to help investors earn a small profit in a short time.
On that note, Bitcoin scalping is the most profitable option, since BTC is a highly volatile cryptocurrency that has a high trading volume. This means that stablecoins are not suitable for scalping.
The main advantages of crypto scalping are quick earnings and minimized risks. However, scalping is also time-consuming, it requires knowledge, and it’s susceptible to whipsaws.
FAQs
What is the best type of crypto to scalp?
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